How Do I Check Whether an Ontario Business Has Unpaid CRA Source Deductions or HST Before I Buy It?
You check by getting the seller to authorize your representative, because CRA will discuss a business's tax accounts with a buyer's representative only if the business allows it. The business can authorize online in My Business Account, or confirm a request your representative submits through Represent a Client.
Payroll deductions an employer withholds and GST/HST a person collects are deemed held in trust for the Crown despite any security interest, and if unremitted the Crown is paid ahead of security interests, except prescribed security interests, and the GST/HST rule does not reach amounts collected before bankruptcy. That is a risk to the seller's property, so it calls for searches and holdbacks rather than automatic liability for you. If you are the seller's spouse or common-law partner, a minor or not at arm's length, you can be jointly liable for the seller's tax debts, up to a cap.
In a share purchase, the corporation keeps its tax liability and old directors can stay personally exposed, though a director who exercised the care, diligence and skill of a reasonably prudent person to prevent the failure is not liable. A lawyer or accountant can confirm what applies to your deal.
Key takeaways
- CRA will discuss a business's tax accounts with your representative only if the business authorizes it, online or through Form AUT-01 for offline access.
- Payroll deductions an employer withholds and GST/HST a person collects are deemed held in trust for the Crown, and if unremitted the Crown is paid ahead of security interests.
- If you are the seller's spouse or common-law partner, a minor or not at arm's length, you can be jointly liable for the seller's tax debts, up to a cap.
- In a share purchase the corporation keeps its tax liability, and directors at the time of a failure to remit payroll deductions can be personally liable.